Australia's government has softened its controversial mandatory detention of immigrants who arrive without visas.

The biggest change is that families with children will no longer be held in detention centres.

The move follows recent media coverage of a three-year-old who had spent her entire life in detention and had mental health problems.

The policy change staved off a revolt within Prime Minister John Howard's government over immigration laws.

Mr Howard said that illegal immigrant families released from custody centres would still be technically in detention, but would be hosted by the community.

Amnesty International Australia welcomed the changes, but stressed that there were still areas of concern.

Amnesty said in a statement that it was not clear what conditions they would live in.

"It is unclear whether existing restrictions attached to alternative detention, such as surveillance and monitoring, will be enforced. It is unclear if families, including fathers, will all be reunited in community detention," it said.

Timing

Other changes announced by Mr Howard include plans to speed up the processing of asylum applications.

He said that a primary decision on someone's detention would now be required within three months, and that the government would have to report to ombudsmen on the cases of asylum seekers detained for more than two years.

Mr Howard added that the cases of 4,000 people on Temporary Protection Visas would be assessed by 31 October.

"What we now have, I believe and what we believe we have even more so after these changes, is a mandatory detention system with a softer edge, but nonetheless a mandatory detention system," he told reporters.

The move follows intense pressure from some of Mr Howard's own party members who had threatened to defy him in parliament if their demands for easing the immigration laws were not met.

Government rebels, led by Victoria state politician Petro Georgiou, have been calling for a conscience vote over the policy of indefinitely detaining all illegal immigrants, but Mr Howard said Mr Georgiou would now be withdrawing his private members bills on the issue.

The government is also currently scrutinising 201 cases of possible wrongful detention under its immigration policy, and the results of the inquiry are due in two weeks' time.

Immigration Minister Amanda Vanstone has said she will take a decision on its release as to whether it should be made public in its entirety.